As an Amazon seller you spend a lot of time pricing, sourcing or figuring out what to sell. It is easy to overlook sales tax. Many online sellers do not understand when they should collect sales tax and what obligations they have to distribute those funds to the individual states. Here is some basic information to get you started.
WHEN SHOULD SALES TAX BE COLLECTED?
Sales tax should be collected from a buyer located in a state where you have nexus, or a physical presence. Even though you may not have an office or employees in a particular state, if Amazon stores and ships your products from their warehouse then that is usually enough to create nexus in that state.
Sales tax rates can vary by product and by jurisdiction. This means that you may have buyers located in two different counties of a state paying different sales tax rates.
What further complicates matters is that some buyers are tax-exempt, meaning they are not subject to sales tax on their purchases.
WHY SHOULD YOU CARE?
Even though sales tax rules and regulations can be complicated for Amazon sellers, that is still no excuse for not being compliant. Amazon can collect the sales tax on behalf of sellers. However, it is the seller’s responsibility to file any necessary sales tax returns. Failure to remit sales tax or file sales tax returns could lead to penalties.
More and more states have their sights set on going after business owners for sales tax, particularly from online sales. In fact the United States Supreme Court is deciding whether online business owners should be required to collect sales tax for states in which they typically have no nexus.
WHAT CAN YOU DO?
You can spend hours upon hours trying to figure out the complex rules in each state and local jurisdiction or you can:
1) Hire a tax professional to register your business as a sales tax vendor
2) Use TaxJar to prepare and file the sales tax return for you.
Whatever you do, don’t let sales tax stress you out or slow down the growth of your business.